[Click eStock] "LG HelloVision, Pay TV Weakness Continues"

KB Securities Maintains Target Price at 4,700 Won... Downgrades Investment Opinion to 'Neutral'
Subscriber Loss Expected Due to Aggressive Sales by Competitor IPTV

[Asia Economy Reporter Gong Byung-sun] An analysis has emerged that LG HelloVision is likely to deliver results below expectations. The aggressive sales of Internet TV (IPTV), a competitor to paid broadcasting, and the absence of blockbuster content due to COVID-19 were cited as reasons. However, synergy with LG Uplus was seen as a positive factor.

On the 1st, KB Securities maintained the target price for LG HelloVision at 4,700 KRW but downgraded the investment opinion from ‘Buy’ to ‘Hold’. Over the past three months, LG HelloVision recorded an absolute return of 26.8%, reaching the target price of 4,700 KRW set by KB Securities, so the target price was maintained. KB Securities assumed LG HelloVision’s long-term dividend payout ratio at around 40%.

The investment opinion downgrade was due to the forecasted downward revision of broadcasting and advertising revenue. KB Securities analyst Kim Jun-seop explained, “LG HelloVision’s first-quarter sales this year are expected to rise 6.1% year-on-year to 274.7 billion KRW, and operating profit is expected to increase 46% to 10.9 billion KRW. However, the operating profit is 22% lower than the previous estimate of 14 billion KRW.”

The underperformance in broadcasting and advertising revenue is attributed to IPTV. Due to IPTV’s aggressive sales, LG HelloVision is expected to experience subscriber churn. In fact, IPTV subscribers of the three major telecom companies have been increasing recently. Such subscriber churn is also expected to negatively impact home shopping transmission fees and advertising revenue. The lack of blockbuster content due to COVID-19 is another reason.

However, once the business restructuring is completed and synergy with the parent company LG Uplus is realized, LG HelloVision is expected to transform into a more shareholder-friendly company. LG Uplus has actively pursued shareholder return policies, consistently aiming for a dividend payout ratio above 30%. Additionally, LG Uplus’s Giga Internet is included in LG HelloVision’s high-speed internet product lineup, and sales centered on bundled products are expected to increase. Analyst Kim said, “Before becoming a subsidiary of LG Uplus, bundled products could not be sold to customers outside the Giga Internet service coverage. With synergy from LG Uplus, the growth trend in high-speed internet sales will continue.”